California

Hot Topic Profit Rises 53%

Hot Topic Inc.'s hot streak continued in the third quarter with the teen retailer's profit soaring 53% as teens snapped up its quirky T-shirts and Halloween costumes such as Freddy Kruger and a nurse uniform made of vinyl.

The Industry-based retailer of music-themed clothes and accessories reported net income of $15.3 million, or 31 cents a share, compared with $10 million, or 21 cents, in the year-earlier period.

The results were 3 cents more than expected by analysts polled by Thomson First Call. The per-share results reflect a 3-for-2 stock split on Sept. 2.

Sales for the quarter ended Nov. 1 jumped 32% to $161.5 million. Sales at stores open at least a year, a key industry indicator, rose 10.8% in the quarter.

The company, which operates 540 Hot Topic and Torrid stores, has been one of retail's strongest performers, boasting five consecutive years of sales and earnings growth. Analysts say that's because it sells unusual merchandise, much of which appeals to youth with off-beat or counterculture tastes.

"Hot Topic is consistently one of the busiest among the mall concepts, so we feel very positive about them going into the holiday," said Adrienne Tennant, an analyst with Wedbush Morgan Securities.

Merchandise sold exclusively in Hot Topic stores accounts for more than 80% of the chain's assortment, up from 75% last year, said Elizabeth Pierce, an analyst with Sanders Morris Harris. Further, the company's 2-year-old Torrid division is one of the few chains offering trendy clothes for plus-size young women.

The retailer said it planned to open 80 new Hot Topic stores next year and 25 Torrid stores.

The company also offered projections that were close to what analysts were expecting. It said it expected per-share profit of 41 cents for the current quarter and 93 cents for the year.

Hot Topic's stock, which has gained 79% over the last 12 months, closed Wednesday at $26.60, down 4 cents, on Nasdaq. The results were released after the market closed.